Talk:European Fiscal Compact/Archive 5

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Debt-brake transparency ?

I have today moved the previous OR-section of the Fiscal compliance chapter, into a temporary "example box". The thought behind keeping it temporarily as an "example box", was that I still find it highly relevant for readers to have a visible example of how this new EU debt-brake will function in the real world. Looking further ahead, the idea is to completely delete the example box in November 2015, replacing it by inline referenced debt-brake figures as part of the compliance table for Germany and Malta. Basically, the idea I propose, is to continue letting the parenthesis in the Debt-to-GDP column show either "increasing" or "decreasing" for the states exempted from appliance of the new debt-brake rule, while those being subject to the new debt-brake rule (in Nov.2015 it will only be Germany+Malta) will have their parenthesis replaced by two parenthesis displaying respectively:

• (baad: X>Z)
  (faad: Y>W)

Baad will be an abbreviation for Backward-annual-average-decline, and Faad will be an abbreviation for Forward-annual-average-decline. All X+Z+Y+W figures are expected to be published by the EC authored recommendation report, filed as a response to the submitted Stability reports in the autumn European Semester. As you all know, the debt-brake rule will function identically for all SGP states and TSCG states, and basically those subject to this rule will be awarded the green compliance statues if either: X (actually achieved baad) > Z (minimum required baad) or Y (actually achieved faad) > W (minimum required faad). So the debt-to-GDP cell will only be red if both X<Z and Y<W. For the sake of letting the Fiscal compliance table reflect transparency of the debt-brake rule, I think this will call for my suggested proposal to be adopted. But it will only be appropriate to do in November 2015, when we have the sources published for the data, and on that time only for Germany+Malta. Until then, I think we should continue keeping the "example box" as some "temporary content". Danish Expert (talk) 16:25, 12 August 2014 (UTC)

Sorry, but after giving it a second look, I just realized the EC already made its debt-brake evaluation debut, towards Croatia in January 2014. Unfortunately without presenting calculated figures, but they noted its debt-to-GDP was breached both going backwards and forwards. When consulting the latest fiscal figures presented by the EC Spring forecast report, it can be concluded Croatia indeed breached the 60%-limit in 2013, where the debt-to-GDP was recorded to be 67.1%. As it was below 60% in 2011+2012, it can be concluded per the calculation definition the baad (Z) (average differential decline for the past 3 fiscal years) was breached. For as long as the debt level is below 60%, its allowed to grow without any restrictions, hence baad (Z) can be calculated to be the maximum debt growth allowed without breaching the debt-level in 2013. In other words: ((45.0 in 2010) - (60.0 in 2013))/3 years = -5.0 per year. However, the baad (X) was: ((45.0 in 2010) - (67.1 in 2013))/3 years = -7.4 per year. So we have X<Z. In regards of the faad values, we can again first calculate the W value to the theoretic maneuver room after 2012 up till the 60%-limit: (55.9 in 2012 - 60.0 in 2015) / 3 years = -1.4 per year, compared to the actual forward-going average Y: (55.9 in 2012 - 69.2 in 2015) / 3 years = -4.4 per year. Meaning we also have Y<W. Cooking all this down to the suggested data format, we have: (baad: -7.4 < -5.0), (faad: -4.4 < -1.4). Danish Expert (talk) 20:56, 12 August 2014 (UTC)

Upon my third look today, I just found my above applied commonsense calculation logic has been adopted by the EC. Although by a slightly different formula from the benchmark angle, rather than the "average annual debt decline" angle. For the backwards-going debt-to-GDP benchmark checks, the EC uses this formula:

• bb_t=60%+0.95/3*(b_t-1-60%)+0.95²/3*(b_t-2-60%)+0.95³/3*(b_t-3-60%). When checking forwards the same formula is applied, just with all the t year-indexes being pushed two years forward.

In our above Croatia example, this mean the maximum allowed debt-to-GDP ratio is 60.0% in 2013, when using the backwards-going formula (while substituting all recorded debt-to-GDP's below 60% with the fictive 60%-value in the formula). For the forward-going benchmark check, it can be calculated Croatia's maximum allowed forecast debt-to-GDP ratio is 65.0% in 2015 (while substituting all recorded debt-to-GDP's below 60% with the fictive 60%-value in the formula). So for Croatia, they wont apply with the debt criteria backwards due to 67.1>60.0 in 2013, and neither forwards due to 69.2>65.0 in 2015. These results can of course still easily be converted to the previously introduced baad and faad format, by applying these simple mathematical operations (baad: (45.0-67.1)/3 < (45.0-60.0)/3), (faad: (55.9-69.2)/3 < (55.9-65.0)/3). For our wikitable, we can of course now choose either to add the two baad+faad parenthesis: (baad: -7.4 < -5.0), (faad: -4.4 < -3.0), or the two benchmark-limit values calculated to be: (67.1>60.0 in 2013), (69.2>65.0 in 2015). Currently I prefer to add the benchmark-limit values parenthesis, both because its more easy (we avoid the subsequent recalculation step) and because of having no direct source for the recalculated results (being a simple operation, but likely not simple enough to satisfy the required simplicity by WP:CALC). Danish Expert (talk) 08:54, 13 August 2014 (UTC)

For the sake of not being counter-intuitive, I suggest we also instead use the $\scriptscriptstyle \nleq$ sign instead of >. Meaning Croatia's 2014 debt data will be presented to be:

• 69.0% in 2014
  (67.1 $\scriptscriptstyle \nleq$ 60.0 in 2013)
  (69.2 $\scriptscriptstyle \nleq$ 65.0 in 2015).

As part of this overall debt-brake definition outlined in the amended regulation 97, a country will only be non-compliant with the debt-brake if both the forward-looking and backward-looking benchmarks are breached. This mean, that you under no circumstances can be deemed breaching the debt-brake rule, if your debt-to-GDP never exceeded the 60%-limit in the past 3 fiscal years. So the fact that the EC in June 2014 by precaution assessed whether or not Finland would breach the "debt-brake rule", shall thus solely be understood as a forward-guidance assessment, only coming into play in case its 2014 debt-level ends above the 60%-limit and not below. Because according to the amended regulation 97, the EC will in all circumstances never be allowed to open a non-compliant debt-brake EDP against Finland, before the state actually has recorded a debt-to-GDP above the 60%-limit in the most recently completed fiscal year. Reading the Finland assessment, it also becomes clear that the EC recently introduced some "breach exemptions". The first one (which was being applied for Finland), was that if a state breach the 60%-limit by an amount being less compared to their fiscal stability borrowings (loan contributions paid to ESM and other bailout funds), this will be deemed to be an "exempted breach" with no EDP to be opened. The way I propose we tackle these "exemption breaches" in the "compliance table", is simply add a note for the states being in this very special situation - explaining why they complied despite breaching the criteria by first catch of the eye. For the 2014-table we currently have no "debt breach exemptions" to note, so the reason I brought it up here on the talkpage, is just for the purpose of clarifying what we shall do if/when this special situation arise in the future. Danish Expert (talk) 11:34, 13 August 2014 (UTC)

Inconsistent EDP compliance checks for Croatia ?

Apparently the Commission for unknown (not reported) reasons refrained to calculate and check whether the debt-reduction requirement is met for Croatia. After the Croatian EDP got opened in January 2014, I had expected the Commission in their staff assessment report of the Croatian Convergence Programme published on 2 June 2014, would have presented the still lacking debt-reduction requirement calculations. However, as you can see at Table IV in the Annex of the report (page 45), all data spots in the debt-reduction requirement table is filled with the word "n.a". Neither the EC report on effective action (published 2 June 2014) include any check of the debt-reduction data.

This baffles me. In particularly after reading the handbook of how the SGP'S EDP checks for "non-transitional states" are supposed as minimum to include a successful compliance check of the forward-looking debt-reduction benchmark before the EDP can be successfully abrogated. In other words, achievement of these debt-reduction requirements during the period of restoring the fiscal situation really matters in order to have the EDP lifted as planned for Croatia in 2016. But how is this possible to achieve if nobody knows whether the implemented measures are sufficient? Point here for Croatia, is they are not granted the same 3-year transition period to comply with debt-reduction rule (as the old 2011-EDP states got the benefit of), but are requested instead to comply with the debt-reduction rule immediately upon the abrogation of their EDP - or else the EDP wont be abrogated. If any of you have knowledge, what sort of data support the Commission staff are preparing for Croatia (and when), please inform us here at the talkpage. Until then, this is really a big unsolved mystery. Danish Expert (talk) 09:43, 2 December 2014 (UTC)

Backward-looking debt-rule check conducted on forecast data (instead of the supposed recorded data for the last fiscal year)

A second point of concern, is that the Commission in their 126(3) report against Croatia (published 15 Nov 2013), concluded existence of a breach of the debt-criterion based on the forecast 2014 debt-to-GDP ratio and the 2014 cyclically adjusted debt-to-GDP ratio and their forecast further rise in 2015. This contradicts the assessment procedure outlined by the SGP implementation handbook, which insist you can not breach the debt-criterion unless the last recorded fiscal year with available data exceeds the 60%-level - while the state neither succeeds to comply with just one of the three debt-reduction criteria (backward-looking or cyclically adjusted backward looking or forward looking). This is a mess. My guts feeling however tells me, that we shall rely more on the quality of the SGP implementation handbook rather than the 126(3) report being written in haste with a sharp deadline. Still, it is of course completely unacceptable and adds to the confusion, that the Commission failed to perform the correct debt-criterion assessment. Upon the time when the 126(6) report opened the EDP in January 2014, it was realized the debt-to-GDP ratio had breached the 60%-level already in 2013, then making it possible rightfully to conclude a breach of the debt-criterion in January 2014 based on the exceeded 60%-limit for the last completed year. Danish Expert (talk) 09:43, 2 December 2014 (UTC)

After looking a bit further into the matter, I can report the latest German debt-reduction assessment (from Nov.2014), also made use of the same forward-guided backwardgoing-check, reporting that its forecast 72.4% debt-to-GDP ratio in 2015 (cyclically adjusted to be 70.0%) would be 5.1% below the 75.1% backward-looking debt-reduction benchmark for the year. However, for Germany the idea to conduct a forward-guided backward-looking check makes perfectly sense, as it is a "transition state", with the special transitional rule only making requirement for the backward-looking check for the first time to be utilized based on final recorded data for 2015, and until that point of time it is needed at least to do some regular checks of how the outlook is for this to be complied with down the road (while remembering Germany at the earliest will risk having a new EDP opened once the 2015 fiscal year has ended - if the data at that point of time exceeds the quantitative debt ratio limits). I suspect the Commission staff messed up the rules when writing their initial 126(3) assessment report on Croatia, as they apparently just duplicated the forward-guided calculation approach used for "transitional states". As the backward-looking data changed only 2 months later, this mistake only becomes academic, but to ensure we all adopt the correct understanding of this, I think its important to highlight Croatia only could be concluded to breach the debt-criterion in January 2014 and not already back in November 2013 (considering the data available at those two times). In this case, the Commission was a bit to fast (two months) in regards of declaring the definitive breach of the debt-rule. Danish Expert (talk) 12:59, 3 December 2014 (UTC)

No MTO has been calculated

A third point of concern, is the fact that Croatia did not yet manage to calculate a MTO during the course of 2014. So 1½ year after accession, they are still without existence of a MTO, which is heavily needed to ensure sufficient quality of the SGP monitoring. The Commission's staff report from June 2014 cited the absence of reliable population ageing data as the reason for this. But wouldn't it be better just to calculate the MTO based on todays known data, and then just recalculate it later when better data arrive? This is another mystery to me, which I think the Commission and Croatian authorities should rectify as soon as possible (delaying until the Commission publish its next EU-wide recalculation of all member state MTOs in December 2015, is not good enough). Please let us know here at the talkpage, if you find a source reporting what the Croatian MTO has been calculated to be. Danish Expert (talk) 09:43, 2 December 2014 (UTC)

Formula for cycle adjusted debt-to-GDP ratio and need for data transparency ?

In the above debate about Croatia, I mentioned the latest German debt-reduction assessment (from Nov.2014), also made use of a forward-guided backwardgoing-check, reporting that its forecast 72.4% debt-to-GDP ratio in 2015 (cyclically adjusted to be 70.0%) would be 5.1% below the 75.1% backward-looking debt-reduction benchmark for the year. At the moment, we unfortunately have no calculated data source for the cyclically adjusted debt-to-GDP ratios. Neither AMECO nor Eurostat nor the Economic Forecast Reports have calculated this figure. Nevertheless, these figures are obviously important, as they form part of the debt-criterion. At the same time, I think the article needs to present a certain level of data transparency for these recently invented figures. As a starting point, I now propose we add a data table featuring the most recently calculated cyclically adjusted debt-to-GDP ratios (based on original AMECO input-data), including a data series across 2013-2016 for all those states with a debt-to-GDP ratio above 60% in 2013.

Formula used to calculate the
cyclically adjusted debt-to-GDP ratio
for year t:

0
Bt + Ct + Ct-1 + Ct-2
b*t =	Yt-3 * (1 + Ypott)(1 + Pt) * (1 + Ypott-1)(1 + Pt-1) * (1 + Ypott-2)(1 + Pt-2)
000000000000000000000000000000000000000000000000000000000000
Bt stands for consolidated nominal gross debt of the general government in year t. Ct stands for the consolidated nominal gross debt generated by the cyclical component of the general government budget balance in year t (note: As the linked AMECO data series for Ct only display this figure as a percentage of 2010 potential GDP at current prices, it shall of course be recalculated back to its nominal figure by multiplying it with the 2010 potential GDP). Yt stands for nominal GDP at current market prices in year t. Ypott stands for potential growth rate in year t (table 13 in source). Pt stands for the GDP price deflator rate in year t (table 15 in source).

For the sake of posting a calculation example, here is the unrounded calculation of the German cyclically adjusted debt-to-GDP ratio in 2015:

2160.1 + (-0.5679% * 2773.917) + (-0.4468% * 2737.788) + (-0.4119% * 2701.796) ^{___________________________________________________________________________________________________} 2749.900 * (1 + 1.320%)(1 + 1.796%) * (1 + 1.332%)(1 + 1.967%) * (1 + 1.195%)(1 + 2.061%)

Giving the result: 70.08%

Which we then finally can compare with the backward-looking benchmark limit for the same year, calculated to be:

bb_t = 60 + 0.95*(b_t-1-60)/3 + 0.95²*(b_t-2-60)/3 + 0.95³*(b_t-3-60)/3

<=> bb₂₀₁₅ = 60 + 0.95*(74.4769-60)/3 + 0.95*0.95*(76.8636-60)/3 + 0.95*0.95*0.95*(79.0443-60)/3 = 75.10%

With the above calculation based on this AMECO source, providing the unrounded input-data for the recorded and forecast debt-to-GDP ratios.

My initial idea, was just to let our article feature the formula for calculation of the cyclically adjusted debt-to-GDP ratios. After giving it some thought, I however now feel the article also could benefit from featuring a data table with all those calculated values, as they are difficult to calculate and impossible to look-up at similar tables elsewhere on the internet. My realistic hope of course is, that AMECO soon will expand their database with the calculated data series for cyclically adjusted debt-to-GDP ratios, so we on that point of time can have the calculated end-result data in our wikitable directly sourced. As it might take another year or two before this happen, we really do not have time to wait for this. Readers of the subject obviously desire to get insight about these figures already today, which is why I think expanding the article with the above formula along with the proposed data wikitable would be a nice improvement. If you have any objection/support or other thoughts on your mind about this issue, please post. Danish Expert (talk) 07:44, 4 December 2014 (UTC)

Upcoming events

Here is a short calendar of upcoming important Eurogroup events, that potentially will provide new/updated info for our article:

• 26 Jan: 6-pack and 2-pack review.
• 9 Mar: EDP implications of the Commission winter forecast, and SGP implementation (including follow-up on draft budgetary plans for 2015).
• 24 Apr: Fiscal compact – implementation.
• 18 Jun: EDP/EIP implications of the Commission spring forecast, and SGP implementation.

In addition to the above events, the Eurogroup is also engaged to discuss and provide proposals for the "4 president's reports" (to be approved on the next Euro summit) on the possibility of incentivising the implementation of key structural reforms in the eurozone, and also provide political guidance to the work of the Commission regarding "increased flexibility of the SGP". When the Eurogroup president at the press briefing (around the 24 minutes mark) was asked for more details on this, he revealed a clear majority of the Eurogroup had expressed they were in favor of increasing the flexibility of the "preventive arm" of the SGP - so that all fiscal limit breaches where the breach solely could be related to costs of implementing structural reforms should be exempted (not causing any opening up of EDPs in the future). However, a clear majority of the Eurogroup also felt this "extra flexibility" only should be given for the "preventive arm" and not the "corrective arm", meaning that it will not be granted for all states engaged in an ongoing open EDP (for as long as it last). Although quite interesting, I propose we wait to report this info in the article, until the point of time when the Commission has published its written proposal, which we can expect will arrive during Q1-2015. Danish Expert (talk) 08:25, 9 December 2014 (UTC)

Table for November forecast

Please correct the table where the new stricter debt criterion has to be used. I'm confused since I thought it would only be used on Germany for 2016 (and then Hungary and Italy for 2017), but it was already used for Croatia for 2015???

Fiscal compliance 2014-16 (Forecast: November 2014)	Debt-to-GDP ratio (in 2014)	Budget deficit (worst figure in 2014-16)	Structural deficit (worst figure in 2014-16)	Structural deficit MTO and its current target year	Bailout program (approved by EC)	Deadline for EDP adjustment (as of 20 June 2014)
AustriaT	087.0% (declining)	2.9%	1.1%	20180.5% in 2018	No	0No EDP (since 2014)
BelgiumT	105.8% (increasing)	3.0%	2.6%	2016-0.75% (surplus) in 2016	No	0No EDP (since 2014)
Bulgaria	025.3%	3.8%	3.4%	20170.5% in 2017	No	0No EDP (since 2012)
Croatia1	081.7% ( $\scriptscriptstyle \nleq$ 60.0 in 2014) 089.0% ( $\scriptscriptstyle \nleq$ 78.9 in 2016)	5.6%	4.7%	N/AN/A	No	20161
CyprusT	107.5% (declining)	3.0%	1.3%	20320.0% in 2032	Yes (expires 2016)3	2016
Czech Republic1	044.4%	2.1%	1.7%	202X1.0% in 202X	No	0No EDP (since 2014)1
Denmark	044.1%	2.3%	1.2%	20110.5% since 2011	No	0No EDP (since 2014)
Estonia	009.9%	0.6%	0.8%	20150.0% in 2015	No	0Never had an EDP
Finland	059.8%	2.9%	1.3%	20140.5% in 2014	No	0No EDP (since 2011)
FranceT	095.5% (increasing)	4.7%	3.4%	20190.0% in 2019	No	2015
Germany	074.5% ( $\scriptscriptstyle \nleq$ 60.0 in 2014) 069.6% ( $\scriptscriptstyle \leq$ 73.1 in 2016)	0.0%	-0.5%	20120.5% since 2012	No	0No EDP (since 2012)
GreeceT	175.5% (declining)	1.6%	-1.0%	N/AN/A	Yes (expires 2016)3	2016
HungaryR, T	076.9% (declining)	2.9%	2.8%	20121.7% since 2012	Yes (expired 2010)2	0No EDP (since 2013)
IrelandT	110.5% (declining)	3.7%	3.8%	20190.0% in 2019	Yes (expired 2013)3	2015
ItalyT	132.2% (declining)	3.0%	1.0%	20160.0% in 2016	No	0No EDP (since 2013)
Latvia	040.3%	1.2%	1.6%	20190.5% in 2019	Yes (expired 2011)2	0No EDP (since 2013)
LithuaniaR	041.3%	1.4%	1.8%	20151.0% in 2015	No	0No EDP (since 2013)
Luxembourg	023.0%	0.6%	0.1%	2013-0.5% (surplus) in 2013	No	0Never had an EDP
MaltaT	071.0% ( $\scriptscriptstyle \nleq$ 60.0 in 2014) 069.8% ( $\scriptscriptstyle \nleq$ 69.6 in 2016)	2.6%	2.9%	20170.0% in 2017	No	2014
NetherlandsT	069.7% (declining)	2.5%	1.1%	20180.5% in 2018	No	0No EDP (since 2014)
PolandR	049.1%	3.4%	2.9%	20161.0% in 2016	No	2015
PortugalT	127.7% (declining)	4.9%	2.0%	20150.5% in 2015	Yes (expired 2014)3	2015
Romania	039.4%	2.8%	2.5%	20141.0% in 2014	Yes (expires 2015)2	0No EDP (since 2013)
Slovakia	054.1%	3.0%	2.1%	20220.5% in 2022	No	0No EDP (since 2014)
SloveniaT	082.2% (declining)	4.4%	2.8%	20170.5% in 2017	No	2015
SpainT	098.1% (increasing)	5.6%	2.8%	20260.0% in 2026	No	2016
SwedenR	040.3%	2.4%	1.5%	20111.0% since 2011	No	0Never had an EDP
United Kingdom1, T	089.0% (increasing)	5.4%	5.0%	N/AN/A	No	2014–151

¹ Did not sign the Fiscal Compact. 0000 ² EU 'balance of payments' programme. 0000 ³ ESM/EFSM/EFSF programme. 0000 ^R Ratified, but not bound by fiscal provisions (Title III).
^T Transitional states, are only required to deliver declining debt-to-GDP ratios in the forecast horizon after their EDP abrogation (for illustrative purposes the parenthesis notes their trend in 2016).

I hope I got all other values correctly. Ambi Valent (talk) 11:53, 8 November 2014 (UTC)

• I tried to compute the debt ratio reference values for 2016 for Germany, Malta and Croatia. Germany succeeds, Malta narrowly fails (debt ratio declines, but 0,2% too little) and Croatia's debt ratio even grows. I'm still not sure which countries the new method should be used for. Ambi Valent (talk) 12:48, 9 November 2014 (UTC)

@Ambi Valent: Sorry for my late reply. Was caught doing other stuff. Completely agree with you its confusing by first catch of the eye, to figure out when the "new debt brake rule" will apply. Reason why it apply immediately to Croatia in 2014, is because they are not covered by the special transition rule (which only apply to EU members with an open EDP in Nov.2011). For the same reason, I decided to add all the T marks in the table to indicate which states were covered by the T-rules. In regards of Germany+Malta, they had their 2011-EDP abrogated in May 2012, which is why they are only required to fully comply with the "new debt brake rule" in 2015. Meaning of this however is (as far as I understood from reading the response by the Irish Finance Minister), Fiscal Year 2015, so that they only start checking for compliance of the recorded backward period for the first time in November 2015 (at the point of time where we also have forecast data for 2016+2017, so that the forward-check cover 2015-17 while the backward-check cover 2013-15). In that case (and I think this is how we should understand it), you are 1 year too early. Anyway, I will give it a closer check during the next 3 days, and in all circumstances update the table in the article with the newest set of data at the latest on 30 November. By the way, we will also learn the Commission's evaluation of the submitted fiscal budgets on 30 November, and then the Eurogroup is scheduled to convene 8 December to discuss if any adjustments need to be made (either to the budgets or to the EDP deadlines). I will make sure also to update the table with any potential EDP adjustments being ruled. Danish Expert (talk) 13:09, 27 November 2014 (UTC)

• The Commission's opinion on Germany's 2014 budget stipulates: Germany is in a transition period as regards the debt criterion, which means that it is required to make sufficient progress towards compliance with the criterion and comply with the debt benchmark at the end of the transition period as from 2014. The evaluation continues to calculate the debt requirement for Germany to comply with by the end of 2014, and find they fully comply by being 3.8 percentage points on the correct save side of the limit.
• However, the meaning of this now gets increasingly complicated. According to Annex 6 of this 2013 EC report, any state will be required during its 3-year transition period to implement an annual Minimum Linear Structural Adjustment with a size equal to what is needed to ensure compliance with the debt criterion at the end of the transition period, which will be decided as the lowest required adjustment calculated by the "Backward-looking benchmark", "Forward-looking benchmark" and "Cyclical adjusted Backward-looking benchmark". If the adjustment implemented in year 1 differs from the MLSA, then one needs to calculate the remaining linear structural adjustment for years 2 and 3, following the same logic as before but with an initial level of debt at the end of year 1 and a transition period lasting only two years.
• This Irish report provides a fine illustration of the applied 4-step assessment, when checking for compliance with the debt benchmark reduction rule. The 3 first checks are those quantitative figures mentioned above, while the fourth is a check whether or not "exceptional circumstances" can be blamed to have caused a potential breach of any of the 3 quantitative benchmarks.
• We are now left with the challenge, that the EC apparently only publish the lowest of the 3 calculated figures. At least this was the case for Germany in 2013. When the EC in a few days release their staff report evaluating the 2015 German fiscal budget, I will check how they continue to report this debt reduction requirement for Germany. If they after the transition period continue to perform backward-looking assessments of the "cyclical adjusted debt-to-GDP ratio", I will make sure the wikitable start to display this additional calculated benchmark check (where we differentiate from the "normal backward-looking benchmark" by adding a * mark to the noted cyclical adjusted limit).
• My temporary conclusion is, that the Irish government and media apparently understood the "new debt brake rule" completely correct. Meaning they are only required fully to comply with it starting from 2019 (if they have their EDP abrogated in May 2016 based on 2015 fiscal data), but at the same time they are required to comply with the "transitional debt reduction requirement" (being part of the new debt benchmark reduction rule) by the end of 2018 - which will ensure the finding of compliance with the "debt benchmark reduction rule" in the following year. So the new debt brake rule will in a similar way only fully apply for Germany+Malta starting once we have available recorded data for the "2015 Fiscal Year", meaning they in theory only risk having a new EDP opened in 2016 if either their backward-looking 2013-15 or backward-looking cyclical adjusted 2013-15 or forward-looking 2015-17 period, does not comply with the "calculated reduction requirement". I will continue my read on this issue during the weekend, and expect I will return sunday to post both an update of the article+wikitable, so that it depicts the correct info about the "transition rule". Danish Expert (talk) 11:43, 28 November 2014 (UTC)

@Ambi Valent: After reading through the entire 76 page long SGP implementation handbook (of which chapter 2.2 from page 50-64 is the most important one to shed more details on our debated "debt brake" matter), I can inform you my initial above reply was correct. Later today I will update the article+table, so that it reflect the below extra points.

1. EC differentiate between an 126(3) criterion breach and 126(6) launch of an EDP, in the way that EDPs are only launched if no valid exemptions for the 126(3) criterion breach is found to exist (i.e. deficit/debt increasing payments to pension reforms or financial stability mechanisms, if leading to criterion breaches, can be exempted). This mean that some states occasionally will be found to have breached the debt/deficit criterion, which will be recorded by the publication of a 126(3) report, but without this leading to the opening up for a 126(6) EDP if certain "exemption reasons" are found to exist.
2. It should be noted that the provision for a transition period for the new debt benchmark rule, means that the 23 states with an open EDP in November 2011, will have their EDP abrogated on basis of the deficit criterion only. However, during their 3 year transition period, they risk to have a debt-criterion triggered EDP opened in case they are not complying with the Minimum Linear Structural Adjustment (MLSA) requirement calculated to ensure respect of the debt criterion by the end of the transition period.
3. As I suspected in my reply above, we also (after implementation clarifications were published how to operationalize the new debt-benchmark rule) now have a "backward-looking cycle adjusted benchmark", along with the two other normal benchmark checks. As per the EC nomenclature, I suggest we label this with a *. So the debt-reduction rule is (when outside the 3-year transition period), that in case it just comply with one of the 3 benchmarks, then it is sufficient not to cause a 126(3) debt-criterion breach. Using Croatia as example, they at present time breached all 3 benchmarks, as their following debt-to-GDP ratios were not less than the calculated debt-reduction benchmarks: 75.7% $\scriptscriptstyle \nleq$ 61.4% in 2013, 0X* $\scriptscriptstyle \nleq$ Y* in 2013, 084.9% $\scriptscriptstyle \nleq$ 72.9% in 2015). As the cycle adjusted figures (X* and Y*) are more difficult to calculate, I have not done it yet. The optimal situation would be, if the EC published these calculations each time they assess the figures, but as far as I know they have not done this yet at present time (most likely because it is only Croatia so far being covered by the new debt benchmark reduction rule in 2014). Although it shall be noted, that EC noted the German gap to their forward-guided 2015-benchmark, to be -5.1% in 2015, while it appeared this was a forward-guided calculation of how the backward-looking gdp-adjusted check would look like in 2015 (assumed to be the least strict one of the three benchmarks). I expect the Commission in their next 2016 fiscal budget check for Germany+Malta (to be published by end November 2015), will publish how all 3 debt-reduction benchmark checks quantitatively respond. As Malta also have a new EDP open (expected to be evaluated whether or not to close in May 2015), it is possible the Commission will also present a forward-guided 3 set of debt-reduction benchmark figures for Malta that time around.
4. The year referred to as t in the listed backward-looking and forward-looking formula, is always the last ended year with recorded data. This is also how the current wikitable in our wikipedia article have implemented it. Meaning that in 2014, the backward check will be all about whether the 2013 debt-to-GDP ratio respected the 2013 debt reduction benchmark, while the forward-looking check will be all about whether the forecast 2015-data will respect the 2015 debt reduction benchmark. At the time of November, it is possible for us for the first time to post how "next years assessment" will be, as the EC consider the current year to be as good as completed and extend their forecast with an extra year. Technically, however, the EC will not do compliance checks according to this "next year data" until they release their "winter forecast report" in February. The EC will even have room only to launch a 126(3) report at first, and then delay their recommendation whether or not an 126(6) EDP shall be opened/closed until the point of time when the state has submitted final recorded fiscal data for the last calendar year - which by regulation always happen by the end of April - and thus coincides with the publication of the "EC Spring forecast" being published in early May - along with the submission of each state's four-year fiscal Stability programme by the end of April. This mean, that SGP compliance in the meaning of 126(6), is assessed regularly for eurozone states twice a year (May + November), where the compliance rules and debt-reduction benchmark index formulas will be the same.

To sum up, the rules are a bit complicated, and the article need to be slightly updated with the above info to clarify the matter. I will do this later today, along with the long awaited update of the wikitable. Danish Expert (talk) 09:45, 1 December 2014 (UTC)

The article has now been updated to reflect all info from the above five points. In regards of MLSA debt criterion compliance during the three year transition period, the specific case of Italy however indicate breaches of this during the transition period seems to be OK - if and only if - the state at the same time is found in compliance with its required "MTO adjustment path". In the case of Italy, we have an interesting divergence between being on its required "MTO adjustment path" (which equals a 0.5% improvement of its structural balance in 2015) and achieving big enough debt reductions to ensure compliance with the debt criterion by the end of its transition period (which equals a 2.5% improvement of its structural balance in 2015). According to the latest November-forecast, Italy has an accumulated too high debt level - equal to the seize of now being required to implement a further amount of 2.4% structural balance improvements in 2015 to ensure a backward-going debt criterion compliance by the end of the year. When reading the Commission's assessment of Italy's 2015 budget plan, it can be concluded the Commission do not care about this potential debt criterion breach as they only focus on what structural deficit improvements need to be implemented for Italy to comply with the requirement of staying on its calculated "MTO adjustment path". In other words, if the latter is achieved, the Commission+Italy gamble this will also ensure compliance with the debt reduction rule when conducting the forward-looking check (as it is evident already now that Italy wont comply with neither the backward-looking check nor the cyclical adjusted backward-looking check). I admit it is all a bit complicated and hard to explain. Bottom-line is, that MSLA debt criterion compliance during the three-year transition period is only desired and not really required, as the Commission has implemented a policy that the main steering instrument during transition periods shall be how the state perform compared to its required "MTO adjustment path". Currently I suspect this is an unwritten policy decision by the Commission, as I could not find this procedure referenced by the Commissions own 2013 SGP implementation handbook. If you can find any reference supporting my observation, then please post it. If no reference can be found, I propose we eventually update the article with the information, and then use the "Italian case" as reference for this special unwritten procedure rule. Danish Expert (talk) 11:33, 10 December 2014 (UTC)

In regards of the above described "Italian case" with no debt criterion compliance, in the sense of insufficient progress detected by the MSLA calculation during its transition period, it is still a mystery why this finding of breach did not trigger the writing of a 126(3) debt breach assessment report. After my second read of the SGP implementation handbook (chapter 2.2.1.3), I however need to clarify the supposed MSLA checks were supposed to be performed during and after each year in the transition period through an ex-ante check for the current year and ex-post check for the previous year (with each check revealing a potential debt-criterion breach, to trigger the writing of a 126(3) report conducting more in-depth investigation). Moreover, when the MSLA performance of a "state in transition" is assessed, they each time do the assessment calculation of the annually required structural balance improvements throughout the remaining part of the transition period, based on the rule that the state needs to comply with the lowest of the 3 debt reduction requirements (backward-looking, or cyclically adjusted backward-looking, or forward-looking) by the end of the third year in the transition period. For Italy (having their EDP corrected in 2012 and abrogated in 2013), this mean, the Commission each time check whether either: b₂₀₁₅ $\scriptscriptstyle \leq$ bb₂₀₁₅ or b*₂₀₁₅ $\scriptscriptstyle \leq$ bb₂₀₁₅ or b₂₀₁₇ $\scriptscriptstyle \leq$ bb₂₀₁₇. It is mentioned, the forecast figures for the nearest years will be based on the commissions forecast report while data for the years further away will be based on the planned government figures extracted from its Stability report submitted each year to the Commission in April. The MSLA will be recalculated each year for Italy, so that it is ensured minimum one of the three debt-reduction rules is complied with once the 2015 Fiscal year has ended. If deviations between the "MSLA required structural balance improvement" and the "actually achieved structural balance improvement" is too great, it shall immediately trigger the writing of a debt-criterion breached 126(3) report. This mean, the Commission according to their own rules, shall now write and publish a 126(3) report against Italy here in 2014. But so far they did not. Instead the Commission only informed Italy, they would re-asses their SGP compliance in early March 2015. This waiting game baffles me, as it appear to be a direct breach of the Commission's own rules for how these situations shall be handled. We shall all keep in mind, that there is a difference between an apparent breach (126.3) and a non-exempted EDP breach (126.6), and my only request here is that the Commission write and assess the situation by a 126.3 report. When they do, I am almost certain they will conclude the Italian breach can be exempted by their recession, but according to their own rules they need to do this assessment straight away - and not delay it for several months! Danish Expert (talk) 13:23, 11 December 2014 (UTC)

@Ambi Valent: My above follow-up reply on the Italian case (written after re-reading both chapter 2.2.1.3 and Annex 6 of the SGP implementation handbook), mean we of course for Malta+Germany then also have the debt-reduction requirement formally enforced once the 2014 fiscal year has ended, with the Commission checking if just one of these three debt-reduction equations are complied with: b₂₀₁₄ $\scriptscriptstyle \leq$ bb₂₀₁₄ or b*₂₀₁₄ $\scriptscriptstyle \leq$ bb₂₀₁₄ or b₂₀₁₆ $\scriptscriptstyle \leq$ bb₂₀₁₆. Although I realize all three inequalities can be calculated and checked for based on the latest November-forecast, I think the most correct approach is to wait with this, until the point of time we receive the next February-forecast, simply because the check is only supposed to be binding once the 2014 fiscal year has ended. Strictly speaking, we need even to wait doing the check until the point of time in early May (when the final recorded 2014 fiscal data has been published by the Commission's spring-report). But I think it can be justified, to introduce the 2014 checks already by February, which is the first published official data report released after the last calendar year of their transition period has ended. A final question, where I would appreciate your feedback, is whether you think we should create a subarticle featuring all the historical "fiscal compliance checks" (displayed by our current wikitable format)? If yes, should we then limit it to include the last of each year's 3 compliance check tables (the one published in November) - or should it include all three editions for each historical year? Danish Expert (talk) 14:20, 11 December 2014 (UTC)

Thanks for your good work. Waiting for February sounds sensible, because it could be easily explained which years' data should be used for the values (the one from the year before and the yeat after). As for the subarticle, I'm for it if it's allowed - I think a page that shows how the compliance values changed over time would be useful. I'm also for using only each year's last forecast (November in the wait-for-February option, or the following February in the wait-for-May option). How far back do you want to go? Only include the years since the Fiscal Compact, or back to the Stability and Growth Pact? (btw, I removed the references from the table above, as they were cluttering the talk page. I had only left them in originally in case there was only a small correction needed and the table could then be copied back to the content page. Since that wasn't happening, they are just in the way now) Ambi Valent (talk) 15:49, 11 December 2014 (UTC)

My idea to create a subarticle featuring historical fiscal compliance data, was only at first to let it display compliance data during the Fiscal Compact era. Meaning only to let it cover historic compliance data for all years starting from 2013, when the Fiscal Compact entered into force. You are correct, that we need to be careful to avoid a conflict with WP:NOTSTATSBOOK. In that respect, its primary focus should perhaps be to describe how Fiscal rules, monitoring, and compliance checks changed during the course of time, and then the historic tables could be argued to be allowed present at least by a collapsible format - so that readers can click them open to view examples of how the fiscal compliance checks looked at various points throughout history.

However, my mind is still a bit in limbo about how it should be. A historic table about SGP compliance (in big need of update), can currently be found at Stability_and_Growth_Pact#Member states by SGP criteria. But the downside of only having such a limited historic data table is, that nobody understands how these EDPs are/were triggered. At present, most readers falsely believe the Commission only did their SGP compliance checks and EDP rulings based on last years recorded fiscal data, but as you and I know, they instead did their checks for the 3yr-window also including forecast data for "current year" and "next year". Denmark will be a great example for such a subarticle to mention, as Denmark's EDP (being opened in July 2010 at a time where no breach was recorded for its recorded 2009 data), was opened solely because its forecast figures were in breach of the "3% deficit limit" (Denmarks debt was always below 60% of GDP, and its recorded EDP deficit for the last completed fiscal year was 2.7% in 2009, and subsequently recorded for the next two years to be 2.5 % of GDP in 2010, 1.9 % of GDP in 2011; so its EDP lasting from July 2010 until July 2014 solely originated from troubles with its "forecast deficits" not respecting the EDP deficit limits in due time ahead of the Commission's May 2010 assessment - where it was forecast to reach respectively 5.5% and 4.9% in 2010+2011).

What I attempt to say is, that the average casual reader today, does not understand why Denmark had an EDP opened in July 2010, when they just take a look at the final recorded statistics, because Denmark's EDP was based on adverse forecast data which never materialized in the way it was forecast. By having these data figures available, it would be possible for readers more easily to understand why these EDP's were triggered at certain points of time (being heavily dependent also on forecast figures). So they kind of provide a good needed support, for our telling of the EDP history. In that way, one could argue it would be OK to include a collapsible table for each year throughout the entire EDP assessment history (going back to 1999).

Our biggest problem might be, that I found the Commission to be somewhat inconsistent lately, in regards of their own rules when exactly to write 126(3) reports - meaning the exact timing of when they do it. I do not consider it a problem, that our table "only" show when the data caused a 126(3) apparent breach, because in those few cases where 126(3) reports did not cause the opening up of a 126(6) EDP, this can easily be explained by adding an "exemption note" for each case in the table. The problem with inconsistency about the exact timing of 126(3)-reports, can also be argued not really to be a problem, as this by itself help us to tell an additional interesting story in the historic subarticle. After your spoken support, I will definitely give it a go. But because of limited time in my working schedule, it will most likely only happen during the next summer holiday. I promise you however, to update the wikitable data in the article (extended with debt-reduction checks for Malta+Germany), as soon as the Commission release their next February forecast. Best regards, Danish Expert (talk) 10:31, 12 December 2014 (UTC)

Compliant implementation laws ?

The European Commission has been tasked by the TSCG to evaluate the implemented national budget rules in each of the Title-III ratifying states, after their 12 month implementation deadline has expired. The implementation deadline expired for the first 14 states on 1 January 2014. As of 1 July 2014 it had expired for 17 states in total, and as of 1 April 2015 it will have expired for 21 out of 22 states (with the only remaining state being Lithuania, who long ago passed their TSCG implementation law - but formally will be granted 1 Jan 2016 as implementation deadline due to only joining title III upon their euro adoption on 1 Jan 2015). Do any of you know if (and when) the EC will write an overall evaluation report? Or can we only expect them to diffuse some more hidden evaluations, as part of their evaluation of the biannual country-specific "Stability reports"? Anyway, as soon as these evaluations gets published, I propose we change the title of the "implementation law" column from the current title "implementation law for enforcement of Title III provisions" to "Compliant implementation law (enforcing all Title III provisions)". Simply to underline the point, that our color code only display a green color for those "implementations laws" evaluated by the Commission to be fully TSCG compliant. Until the EC evaluations gets published, I can live with a status quo in the article, so just wanted to publish my opinion about this issue in advance. Danish Expert (talk) 09:52, 11 August 2014 (UTC)

I think such a solution would suggest the EC has more power than it does. The Member States should implement, and the EC should evaluate, but if the EC feels a memberstate is non compliant that legally has no value unless that is the outcome of a non-compliance procedure (which the EC may start). So from an "innocent unless proven guilty" standpoint we should keep the colours even if the EC states (small or large) concerns; although we may need to add a footnote that compliance has been suggested by the EC... L.tak (talk) 10:34, 11 August 2014 (UTC)

@L.tak: Recently I learned the EC will publish their long-awaited assessment report by mid-2015, while the Eurogroup expect to debate the "Implementation of the Fiscal Compact" on 24 April 2015. I suspect this mean, that the assessment report will be available at least in its draft format, sometime between 1st and 23rd April 2015. You posted a valid concern, that we shall avoid awarding the EC with legal judgement powers it does not possess. But on the other hand, I think their assessment findings are still important info to add, based on the fact that Article 8.1 of the TSCG actually tasked the EC to perform this compliant assessment as part of the "legal procedure" to ensure a TSCG compliant implemenation of the "balanced budget rule" and "automatic correction mechanism" into national legislation.

In perspective, all EU Member States (except UK), have already been bound by Chapter 4 of Directive 2011/85/EU (as part of the sixpack), which ensured all EU Member States (except UK) were required to transpose numerical fiscal rules compliant with the SGP into their national legislation by the end of 2013. This mean, that states like Poland and Sweden already made sure to have such things in place ahead of their ratification of the TSCG. In both states, it was however declared by their own parliamentary committees involved in the process to ratify the TSCG, that if their parliament chose to be bound by Title III of the TSCG, then their pre-existing "national numerical fiscal rules" (despite already including debt-brake rules) would still need to be updated in order to be fully TSCG-compliant - which is why they decided no to be bound by Title-III for as long as they have not joined the eurozone.

My point is, the implementation of TSCG Title-III background color should therefore not reflect whether or not "national numerical fiscal rules" exist in the concerned states (because we know these rules do exist in all Member States - except UK), but whether or not these existing "national numerical fiscal rules" are fully compliant with the "Title-III provisions". For this purpose, I still suggest we use the "EC assessment report" as the first available "color source", but of course accept your call it should be followed by a "clarifying note" explaining this for a start only is a non-legal opinion (with a final legal compliance-ruling still pending potential court proceedings to start). If we do it like this, would you then be willing to accept it? Danish Expert (talk) 14:03, 2 January 2015 (UTC)

Next revision round for EDPs just started

This is just to bump a note, that the next revision round for EDPs started here on 15 Oct 2014, when all eurozone states published their new 2015 Fiscal budget draft laws. The procedure is, that the Commission will publish their response to each state on 15 November, which will be based upon additional analysis of their EC Autumn Economic Forecast Report (scheduled for release on 5 Nov 2014). After reading through all eurozone budgets, it appear they all (except France) respect their granted EDP deadline. France were supposed to deliver a budget within the 3%-deficit limit at the latest in 2015, but now plan only to achieve this in 2017.

If the Commission find that an adverse economic climate solely is responsible for the French delay to obey their EDP deadline, the rules allow for the EDP deadline indeed to be postponed (upon a decision by the Council of the EU in late November or early December - choosing to agree on the Commission's recommendation for a postponed EDP deadline). If not, the Commission should respond to France immediately on 15 November, that they need to implement additional fiscal consolidations to achieve the initial deadline for fiscal order in 2015, which in the absence off will trigger the Commission to take the next step and recommend the Council of the EU during the course of 2015 to impose a 0.2% of GDP deposit for France to pay (later being converted to a fine if the deadline is indeed breached without presence of any excusing exceptional reasons).

I really look forward to see how this potentially dramatic French story will turn out, during the next 2 months. However, my first thought is, that these details are probably too detailed to remit inclusion as a note in the article's Fiscal compliance chapter. When I get more time (probably around January), I plan to write a small more detailed chapter over at the Stability and Growth Pact article, about how the EDP procedure currently plays out. If any of you have time to do it ahead of me, you are more than welcome. Best regards, Danish Expert (talk) 12:14, 16 October 2014 (UTC)

Verdict is in. France has now been granted a 2-year EDP delay. This mean that France is only required to comply with the 3%-deficit limit starting from 2017. The assessment process made by the Commission is so complicated, that the best way to understand it, is by reading each 126(7) report carefully from top to bottom. When doing this, we learn that France did not deviate significantly from achieving their required structural deficit adjustment in 2014, when the Commission adjust the figures from adverse development in the inflation and real GDP figures compared to the baseline scenario forecast made upon the time when the EDP-deadline last time got extended in 2013. This justify why they now get their EDP-deadline extended. Normally it would only be extended by maximum 1 year at a time. But since France at the same time submitted a dedicated structural reform programme (which takes time to prepare and implement) - through which fiscal consolidation will also be achieved while being monitored closely in half-year cycles as per the new "SGP flexibility rules", and since the annual structural deficit improvement through a two-year extension still will equal improvements above the minimum requirement of 0.5% per year - while improvements above 1% at the same time is considered to be too demanding to achieve for the fragile French economy, this all together opened the door for a 2-year extension of the EDP-deadline.

To put all this into the Fiscal Compact context, it is quiet interesting to note, that "achieving the structural deficit adjustment targets" or the "MTO structural deficit target" itself, apparently will be assessed according to the same practice, where the structural deficit figures are adjusted one level deeper through a bottom-up analysis - in which particular adverse inflation developments will be compensated along with adverse real GDP growth. In example, when France in 2013 was expected to have a 1% inflation in 2015, and when this is realized two years later only to be a 0.0% inflation, this has an adverse impact on the structural deficit of roughly 1.0%, which basically is why France were granted their 2-year extension. The verdict is however still out, if all the implemented national automatic correction mechanisms also have incorporated inflation adjustments into their assessment of the need for implementation of additional corrective measures. Hopefully the upcoming assessment report of the national laws implementing the Fiscal Compact, will soon shed some more light on this. I suspect all states automatically (at least from now on), will perform "inflation adjustments" of achieved "structural deficits" when operating their automatic correction mechanisms - along the same line as the Commission just did - but still think we should await the Commission's "implementation report" due in a few months - before mentioning "inflation adjustments" as a certain part of the automatic correction mechanisms. Danish Expert (talk) 18:55, 23 March 2015 (UTC)

According to the following cite from the French country report 2015, their fiscal advisory council actually triggered the "automatic correction mechanism" to be applied - although with no correction measures subsequently being implemented:

• "In May 2014, the High Council for Public Finances identified risks of serious deviation from the structural adjustment path set in the programming law for 2012-17 and consequently triggered the correction mechanism. Under the 2012 organic law, the government had to present corrective measures to reduce the gap with a view to meeting the structural targets. However, the government instead lowered its structural deficit targets for 2014 and 2015 in the new multiannual programming law, making them consistent with the expected outcomes for 2014 and 2015. Although the gap with the previous programming law is set to widen further, the revision in multiannual targets means that no correction is expected."

Apparently the French loophole to avoid implementing correction measures in 2014 (according to their own Fiscal Compact implementation law), was to replace their "programming law 2012-17" with a new "programming law 2014-19", which carried some more lenient structural deficit targets for the subsequent years (extending their adjustment path towards their MTO). My own opinion is, that by using such loophole, this so-called "automatic correction mechanism" can no longer be trusted. Of course I fully support the possibility for the Commission to extend the adjustment period when adverse economic developments outside the influence of the member state occur. My problem in this case, however, is the incorrect order of events. In such case, it should start with the event that the Commission in spring 2014 sanctioned the new adjustment path - leading to "no correction mechanism" being triggered. The opposite development, where the government is ordered first by their own fiscal advisory council to implement correction measures, then by-itself decide to extend the length of their adjustment path to avoid being forced by their own law to implement the ordered correction measures, followed a year later by the Commission's approval of the government's "extended adjustment path", is a really bad order of events, which only result in doubt whether or not the French automatic correction mechanism can be trusted to work in the future. We shall see. I still hope for the Commission's report assessing each state's Fiscal Compact implementation law, also to investigate whether or not their implemented automatic correction mechanisms carry the same "French loopholes" as we just witnessed the existence of in France. Danish Expert (talk) 08:31, 24 March 2015 (UTC)

Czech status

@Danish Expert: I saw your hidden note here, and was wondering where you found out about this dead Czech source? Perhaps you have already looked, but there are places that archive links, so it may be possible to find a version of the article.

My personal suspicion is that ratification is delayed pending approval of the constitutional amendment implementing the Fiscal Compact [1], but haven't been able to find anything that says that. TDL (talk) 17:13, 24 March 2015 (UTC)

The Czech source which disappeared for me, did so back in November 2014. It was published in August/September 2014. It was written in Czech, and I was reading it through a Google-translation in October, but forgot to save the link and neither saved its title. When searching for it one month later, I was unable to find it. My search here in March was also in vain, and I have now given up to find it again. So I just assume it was removed from the Internet for one reason or another. Anyway, it is hard to assess how important it really was. I suspect it was just a political statement made by TOP-09 about their political position on the Fiscal Compact (expressing their position that a "title III declaration" should also be made as part of approving the Czech accession to the treaty, meaning it was not a political ultimatum to vote yes - but just a statement to highlight their political position what they would do if having majority on their own), ahead of the debate expected at that time to take place in the House of Deputies in Autumn 2014. You might be right in your suspicion, that passing the constitutional amendment you linked to, which introduces a "debt brake", might be an intertwined part of the political process to approve Fiscal Compact accession. In technical terms, however, the two bills are not intertwined at all, as the Fiscal Compact have no requirement for participating states to implement a "debt brake" into their national legislation. The treaty only require for the "budget deficit rule" and "automatic correction mechanism" to be implemented into national legislation. Implementing "debt brakes" into national legislation beyond the "debt reduction rule" - which already apply for all EU states (except UK) as part of the SGP, is actually a voluntary thing to do. In example, Denmark chose not to implement a specific "debt brake" into our national legislation, despite of having implemented the Fiscal Compact in full. Only if the bill mentioned by Reuters also include paragraphs implementing the "budget deficit rule" and "automatic correction mechanism" into the national legislation, the pass of this bill could be technically intertwined with the pass of the Fiscal Compact accession bill. Unfortunately, I have not got time to check this question at the moment. If somebody has, it would be interesting to learn (and note in the wikipedia article) if the proposed constitutional amendment also include the "budget deficit rule" and "automatic correction mechanism" beside of the so-called "debt-brake" provisions. Danish Expert (talk) 14:48, 26 March 2015 (UTC)

I agree that there is no legal connection between the two bills, I just wonder if there is a political connection. Some sort of compromise with TOP 09 or something. Just something I was trying to see if I could find any sources on.

I did a bit of digging and found a few interesting articles: [2][3][4][5]. I think these are basically saying the same as what you had read, that TOP 09 will only approve ratification if it includes a declaration for the full treaty, but the translation is a bit garbled. TDL (talk) 20:00, 26 March 2015 (UTC)

Thanks a lot for digging up the links. [4] from zpravy was the most informative one, where the PM confirmed he could meet part of the TOP09 condition for passing the Fiscal Compact accession bill, explicitly stating his coalition was ready to pass a "debt brake". In other words, I agree with you that it seems plausible to assume this pass indeed is a coalition attempt to gain TOP09 support for the pass of the Fiscal Compact accession bill. I am excited to learn if TOP09 will now support accession without their initially required immediate Title III commitment. However, it seems like they started out to be very firm about this conditional support, so I would not be surprised if they still require this Title III declaration as part of passing the accession bill. The implemented coalition CSSD+ANO+KDU fiscal policy is forecast to return a structural deficit of 1.7% in 2015 and 1.5% in 2016, and according to your links, the reason why they wont support immediate Title III commitment is a desire to keep it this high (not being forced to reduce it to 1.0% for as long as not having joined the euro). In case TOP09 showcase continued resistance to pass it without Title III commitment, a pragmatic compromise (also satisfying the coalitions ambition to burn some extra money in the short term) perhaps could be a pass of the required Title III accession on 31 December 2015, meaning the 1.0% limit then only will become binding to them starting twelfth months later from fiscal year 2017? Danish Expert (talk) 05:01, 27 March 2015 (UTC)

By the way, the Czech coalitions argument that they (for as long as not having adopted the euro) want to operate a similar lenient structural deficit limit as Lithuania, Sweden, Poland and Hungary, is mainly a twisted argument. First of all, Lithuania as an ERM-II country was already bound by a 1.0% limit for their MTO (to be reached in 2015 through a series of 0.5% improvements), being required by the SGP regulation ahead of signing the Fiscal Compact in 2012. In regards of Sweden, they have straight through all crisis years operated and respected a 1.0% limit for their MTO on a voluntary basis. Poland likewise opted to set a 1.0% limit for their MTO when signing the Fiscal Compact, to be reached in 2018 through a series of 0.5% improvements. The bottom line is, that it is only Hungary having utilized their freedom to set a more lenient MTO compared to the limit in the Fiscal Compact, having set their MTO at the magic 1.7%. I know it is true that Lithuania+Sweden+Poland+Hungary all opted to ratify the Fiscal Compact without Title III commitment, but strictly speaking only Hungary is running a MTO lower than 1.0%, so its incorrect when the coalition jump to the conclusion that the three other states opted not to do it for the simple reason of running more lenient MTOs. Only Hungary possessed this dark irresponsible motive. :-) Danish Expert (talk) 10:05, 27 March 2015 (UTC)

As a final note, the new Czech fiscal responsibility law being submitted by the coalition to embed their "debt brake" and "MTO compliant expenditure rule" into the Czech constitution (now also mentioned by a line written in the article on 27 March), actually mean they are very close already to enact a national fiscal responsibility law being fully Title-III compliant (as required by TOP 09). Taking the full step also to submit a Title-III declaration would only entail minor extra requirements/commitments for the Czech Republic to respect. The extras would be: (1) Commitment to write and respect an Economic Partnership Programme if/when becoming subject to a new EDP, (2) Commitment to submit its public debt issuance plans in advance to the European Commission - for the purpose of informing other member states in advance.
The state is already fully subject to the debt-brake provision through the already applying SGP regulation. Apparently compliance with the "automatic correction mechanism" and "balanced budget rule" will also be reached through the pass of the recently proposed constitutional law. Although, I acknowledge the "balanced budget rule" compliance will only be de-facto, as the -1% not will be enforced for-ever as an automatic lowest possible MTO-limit without the pass of a Title III declaration, while it should be noted, however, that the current situation according to the MTO-calculation-formula actually reveal, a Czech MTO being calculated anyway (without this limit being enforced) to -1.0% for the 2013-15 period. As the link for the formula display, the MTOMT (MTO country-specific Minimum Target) is calculated to be: Maximum (MTOMB, MTOEA, MTOSM) <=> The lowest value of {MTOMB, MTOEA, MTOSM} will be equal to MTOMT. Without any Title III declaration, this basically only means, that MTOEA is not being considered in the equation for the concerned state. For the Czech Republic, the MTO is however still calculated to be -1.0% because of the calculated result of the MTOMB formula and MTOSM formula (in fact this has been the case for all of the most recent 11 years, as reported by these table figures for the 2005-2015 period). So joining Title III will defacto not create any real difference for the calculated MTOMT that the Czech Republic needs to respect (as required by the SGP). Or to say it more precisely, there would have been absolutely no extra strict MTO-commitment for the Czech Republic to respect during the current medium-term period 2013-15, if they had already joined the Fiscal Compact and submitted a Title-III declaration in 2012. If the MTOMT again will be calculated for the Czech Republic to be -1%, when the Commission here later in 2015 present its revised MTOMT calculations, it will then continue (as in the past 11 years) to be identical with the "Fiscal Compact limit" also for the next three-year period in 2016-18. Danish Expert (talk) 12:10, 30 March 2015 (UTC)

Denmark's structural deficit definition differs

Somehow this slipped my attention, but Denmark actually opted to implement our own subjective definition of how to calculate the structural deficit. This mean, that it differs from the "structural deficit" calculated by the European Commission.

The Danish calculation method returned the following figures for the structural balance of the general government:

• -0.3% in 2013, -0.8% in 2014, -0.7% in 2015, -0.5% in 2016.

In comparison the EC calculation method returned:

• -0.1% in 2013, +1.2% in 2014, -1.8% in 2015 and -1.5% in 2016.

When comparing the figures (as part of assessing which method is the best), it should be noted the Danish government in 2014 implemented a net amount of fiscal stimuli towards the economy rather than fiscal consolidation (according to the independent Danish Fiscal Advisory Council, see Tabel I.4 page 121 in their latest report), which is also reflected by the figures computed by the "Danish method" (showing a deterioration of the structural balance from -0.3% in 2013 to -0.8% in 2014), but not at all reflected by the figures calculated by the "EU method" (instead incorrectly indicating a big "fiscal consolidation" took place in 2014). Likewise, the bottom-up figure for the budget plan in 2015 reveal that the government in this year opted to implement a minor fiscal consolidation, which again is reflected by the structural balance calculated by the Danish method - while the EU method incorrectly indicate a huge fiscal stimuli is causing the structural balance to deteriorate from +1.2% to -1.8%. This proofs, that the Danish method indeed is a far more accurate and better steering tool when designing next years fiscal budget compared to the basically misguiding EU method.

Ahead of the pass of the Fiscal Compact implementation law, the Danish authorities received a written letter from the European Commission, confirming that if the "implementation law" referred specifically only to use the Danish calculation method for determining the "structural balance" (being different from the "European Commission method"), this would still be assessed as being in full compliance with the paragraphs of the Fiscal Compact - as it did not dictate which calculation method should be applied. The written letter also inform, that the only part of the Fiscal Compact in which utilizing the "EC common method" for calculating structural balance is mandatory, is when the European Commission every third year recalculate each states MTO. Finally it clarifies, that although only the "EC common method" is utilized by the preventive+corrective arm of the SGP, potential existence of "significant breaches" will always be assessed on basis of an overall careful analysis (also performing a "expenditure benchmark calculation" and "bottom-up calculation" while taking special circumstances mentioned by the national authorities into account to check if breaches can be legally excused), which all in all would mean a great likelihood (without any guarantee this would always be the case) for the EC to arrive at the same compliance conclusion after having conducted the additional careful assessments, irrespective whether the "EC method" or "national method" initially was used.

The Danish fiscal responsibility law implementing Title III of the Fiscal Compact, explicitly emphasize that the Danish MTO and automatic correction mechanism shall work to enforce a -0.5% limit for the structural balance of the government budget according to the Danish calculation method. In case a significant breach of the limit occur for the upcoming next fiscal year (causing the structural balance to be worse than -1.0%), at the time when the Danish Ministry of Finance submit its fiscal budget law proposal in August (according to the own estimates of the Danish Ministry of Finance), the automatic correction mechanism will be triggered so that the law can not be passed without the accompanying pass of extra measures of corrective action bringing the structural balance back to the correct side of the limit. The independent Danish Fiscal Advisory council conduct assessment of compliance with the "Fiscal Compact implementation law" through biannual reports in October and May, but unfortunately has no role to play in the function of the "automatic correction mechanism". In the event later fiscal estimates (submitted after August) will cause a deterioration of the structural balance, this can not trigger "automatic corrections" for the year in concern, meaning that the "automatic correction mechanism" only work in regards of ensuring automatic corrections for "next years fiscal budget law" - with no automatic corrections possible for the "current fiscal year" (starting from the moment when the fiscal budget proposal is submitted in August). The "implementation law" however ensure for the "current fiscal year", that no new measures with an adverse impact of the structural balance (outside what was outlined by the fiscal budget law proposal) can be passed without at the same time including additional compensating measures - making the overall impact either neutral or positive. So the "structural balance" kind of gets locked from the moment when the fiscal budget proposal is submitted in August, so that it only will be vulnerable to subsequent fluctuations caused by incorrect technical estimates/forecast (which the European Commission normally also excuse), and not vulnerable to potential deterioration caused by new political initiatives with adverse budget impacts.

The special Danish calculation method for determining the "structural balance", kind of make sense from an academic point of view, because it adjust the structural balance from sudden unexpected changes, such as "financial market developments" and "oil revenue changes" outside control of the state. These extra adjustments are not made by the common EC calculation method, although it should be noted the technical bottom-up adjustment of the structural balance performed as part of the SGP expenditure analysis in the annual SWD report (which assess whether or not a state respected its MTO), according to my personal understanding automatically will make adjustments for all of these extra extraordinary impacts. Or in other words, while the Danish calculation method greatly differs from the EC calculation method for the "structural deficit" figure itself, it tends to be somewhat equal to the special "technical bottom-up adjusted structural deficit as per the EC calculation method".

• Factual note about the Danish calculation method: It was developed in 2001 by the Danish Ministry of Finance, and used ever since as the main steering tool when crafting next years fiscal budget law and setting four-year expenditure levels for both the local and central government. In short, the Danish method calculate (like the EU method) the structural balance as the Budget Balance minus Cyclical correction minus Extraordinary one-off measures, but with the latter category also including these 6 extra elements compared to the EU-method: Corporation Tax revenue (corrected for deviations from the historical 30-year average structural budget contribution of 2.2% GDP), Car registration fees (corrected for deviations from the historical 30-year average structural budget contribution of 1.2% GDP), Pension yield tax revenue (corrected for deviations from an expected yield revenue stemming from a 15-year historical yield of 5.75% on a moving annually-adjusted total amount of invested capital - subject to a tax rate of 15%), Net interest payments (corrected for deviation from the calculated 7-year sliding average for the "current period" encompassing 4 recorded years and 3 forecast years), Oil revenue (corrected for deviation from the calculated 7-year sliding average for the "current period" encompassing 4 recorded years and 3 forecast years), "special budget items" (corrected for deviation from the calculated 7-year sliding average for the "current period" encompassing 4 recorded years and 3 forecast years). The two methods are only identical when it comes to the 1:1 adjustment of the 7th category referred to as "other extraordinary one-off budget posts". The EU-method adjusts differently for the six other categories, i.e. it attempts adjusting for fluctuations in "Car registration fees" + "Corporation tax revenues" through the cyclical adjustment budget elasticity. Unfortunately, the EU-method also completely ignore adjusting for unexpected extraordinary fluctuations in "Pension yield tax revenue", "oil production revenue" and "net interest payments". Beside of adjusting the structural budget balance for these extra elements, the "Danish method" also apply a more accurate method to calculate the cyclical component of the government's budget deficit (compared to the method currently used by OECD and EU), based on a very complex historical regression calculation model (named ADAM), which computes an intertwined employment-gab and output-gap as part of determining how big the cyclical correction of the budget deficit was in a given year. The decision to continue using the Danish calculation model, was made because it produce more accurate stable reliable results compared to the EU method. As explained by this report: Ministry of Finance's method of calculating the cyclical component of the fiscal budget balance differs from the OECD and the EU's method, which - instead of a model calculation - are calculated on basis of direct estimates of the cyclicality of separate budget lines based on historical data. This OECD/EU method is considered to be more uncertain, as uncertainty about policy purification of the tax base and the provision of the gab will be transferred to the estimates of budget elasticities. For those who are interested to read more about the Danish calculation method, it is explained in full by this official technical note.

Unfortunately, this Fiscal Compact treaty is really getting more and more complicated for the casual reader to understand. Beside of a range of underlying complicated calculation formulas (not described directly by the treaty - but found in accompanying SGP regulations and code of conduct - that we now finally managed to explain correctly in the article), we also basically have room for 28 different "structural deficit" definitions beside of the one being applied by the European Commission. For sure, we now also need to mention this in the article, one way or another. Not only by a single line, but perhaps also by creating a special overview-table which briefly display how each state opted to implement the Fiscal Compact into national legislation (i.e. also noting if special "debt brakes" were created and whether or not the fiscal advisory councils have been established as independent structures)? Personally I suspect around half of the states opted to implement a "EC structural deficit calculation method", while the other half implemented their own "national structural deficit calculation method". For comprehension+transparency reasons, I think it would now be relevant somehow to create a table to inform the readers about this. Before I start doing anything, let me know what you think about this "structural deficit" calculation method issue, and how we best tackle this issue in the article. Danish Expert (talk) 20:48, 31 March 2015 (UTC)

121(4) warnings

The article has explained how 126(6)+126(7) EDP decisions are related to the Fiscal Compact. Yet a line or two still needs to be written, to clarify the relationship with 121(4) MTO warnings triggered by the preventive arm of the SGP. As far as I understand the SGP manual, the 121(4) warnings will be issued towards any EU member state found ex-post (for the latest recorded fiscal year) to have both (1) a "significant structural balance deviation" (more than 0.5% from the one-year target or two-year target average, measured against the MTO or adjustment-path towards the MTO) and (2) a "breach of the expenditure benchmark" (meaning that government expenditure grows faster than a reference medium-term rate of "potential GDP growth" with the add of potential "discretionary revenue measures yielding additional revenues"). The same check is basically conducted ex-ante for the "current year" and "following 3 years", but for the ex-ante part of the assessment the Commission apparently limit itself just to issue non-binding recommendations for the state to prepare a revised stability/convergence report - as part of the official council recommendation issued in July on the subject of this report. It should also be noted, that while utilizing "national methods" for calculating the "structural balance" is fully accepted by the Fiscal Compact (with no requirement for "domestic Fiscal Compact implementation laws" to utilize the common EC-method), neither 126 EDP procedures nor 121(4)-procedures will utilize "national calculation methods" - but only calculate each states structural balance according to the common EC-method. Danish Expert (talk) 14:44, 4 April 2015 (UTC)